NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $/ORDER in Austin, TX, DA 95-/$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installations/$ $/76.944 Commission Review of Franchising Authority Decisions/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) Austin CableVision, a division ) of Time Warner Entertainment ) DA 95-2363 Co., L.P. ) ) Petition to Appeal ) Franchising Authority's ) Ordinance Regulating Basic Cable ) Rates in Austin, TX ) MEMORANDUM OPINION AND ORDER Adopted: November 13, 1995Released: November 29, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On July 7, 1994, Jack Hopper, a subscriber of Austin CableVision ("ACV") during the period covered by the local rate order, filed with the Commission an appeal of the local order adopted by the City of Austin ("the City"). The rate order established rates for ACV's basic service tiers and associated equipment and installation rates. The rate order also required ACV to implement refunds of $300,000 and provide free programming services valued at $479,000 to its subscribers as recompense for overcharges assessed for service provided during the period of September 1, 1993 to May 14, 1994. ACV implemented the refund agreement in July 1994 by providing billing credits and free programming to its then current subscribers. Both ACV and the City filed oppositions to the appeal. 2. Mr. Hopper makes the following arguments regarding the City's ratemaking process and its decision and ACV's refund methodology. He claims ACV used an improper refund methodology by restricting its refund plan to current subscribers at the time of the refund implementation and providing in-kind refunds. He also alleges that the City failed to consider its own staff recommendations when it agreed upon the refund plan suggested by ACV. Finally, he states that the City improperly approved ACV's a la carte package. In response, the City asserts that it is barred by Commission rules from prescribing a specific refund method. With respect to the allegations about the agreed-upon refund plan, the City contends that its findings have a reasonable basis and that the operator provided evidence regarding the value of the programming services that would be offered at no charge. The City further states that it did not "approve" ACV's a la carte package and that it concluded the package was a regulated rate offering. ACV asserts that its decision to credit its subscribers for overcharges was appropriate under the Commission's rules. ACV disputes Mr. Hopper's allegation that the City failed to consider its regulatory staff's recommendations in establishing ACV's rates and associated refund liability. Finally, the operator states that although it believes its a la carte offering complied with applicable regulations, it does not contest the City's disallowance of the package. 3. In ruling on appeals of local rate orders, the Commission does not conduct a de novo review, but instead will sustain the local authority's order as long as there is a reasonable basis for its decision. The Commission will therefore reverse a local authority's decision only if it is determined that the local authority acted unreasonably in applying the Commission's rules in rendering its local rate order. If the Commission reverses a local authority's decision, it will not substitute its own decision but will instead remand the issue to the local authority with instructions to resolve the case consistent with the Commission's decision on appeal. II. DISCUSSION 4. FCC Form 393 is the official form used by regulators to determine whether an operator's regulated rates for programming, equipment and installations were reasonable during the time period from September 1, 1993 until May 14, 1994. Form 393 is divided into three separate, but interrelated parts. In Part II, the operator calculates its maximum permitted programming rates, while in Part III, the operator calculates its maximum permitted equipment and installation rates. Part I is a cover sheet that lists the various programming, equipment and installation rates that have been calculated in Parts II and III and compares them to the rates the operator has actually charged during the period of review. 5. The operator's maximum permitted rates are derived by completing Parts II and III of the Form 393, pursuant to which the operator calculates the actual aggregate revenues collected by the operator for regulated programming, equipment and installation, as of the initial date of regulation ("current rate") or as of September 30, 1992. After calculating actual aggregate revenues, the operator converts those revenues to a per-channel rate, and then compares the per-channel figures to the applicable benchmark rate. If an operator's current per-channel rate is below the applicable benchmark rate, then the operator's rate is deemed reasonable, but it must remain at its current level. If its current per-channel rate exceeds the benchmark rate, the operator must then compare its September 30, 1992 per-channel rate to the applicable benchmark rate. If its September 30, 1992 per-channel rate is above the benchmark rate, it must reduce this rate to the benchmark rate or by 10%, whichever reduction is less. After computing the permitted rate level in this manner (whether based on current rates or September, 1992 rates), monthly equipment and installation costs are removed to derive the maximum permitted rate for programming. The adjusted rate will be its maximum permitted rate for programming. Maximum permitted rates for equipment and installation are based on actual cost and are calculated in Part III of the Form 393. Under our regulations, the maximum permitted rates are deemed to be reasonable, as required by the 1992 Cable Act. 6. To satisfy its refund liability under the local rate order, ACV states that in its July 1994 billing cycle, it provided current subscribers a refund of $300,000, approximately $2.51 per subscriber, and provided programming services worth approximately $479,000 to subscribers as of July 1994 free of charge. Mr. Hopper asserts that this was improper and that all subscribers on the system who were served between September 1, 1993 though May 26, 1994 should receive a refund and the form of that refund should be in cash. He states that he cancelled his cable service prior to the adoption of the rate order and that he therefore is barred from participating in the refund plan. Both ACV and the City argue that the Commission's rules give an operator the latitude to choose the method it may use to refund overcharges. 7. Under our rules an operator is not required to provide a refund in cash to subscribers. Furthermore, the operator may legitimately restrict the class of subscribers receiving refunds to current subscribers, as ACV did here. Therefore, there is no legal basis to compel the relief that Mr. Hopper seeks. Thus, we deny Mr. Hopper's appeal of the local rate order adopted by the City of Austin. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the appeal petition filed by Mr. Jack Hopper of the local rate order adopted by the City of Austin IS DENIED. 9. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau